Diesel Refund for Food Manufacturers – Registration

Initially scheduled for 26 September 2023, the rollout date for the Diesel Refund for Food Manufacturers Scheme (DRFMS) has been extended to 29 September 2023. The South African Revenue Services (SARS) has opted to perform additional testing and quality assurance measures to the ensure effective implementation of the digitalised and streamlined electronic registration system for this new refund scheme.

In the 2023 budget speech, the Minister of Finance announced a tax relief measure to address the load-shedding problem the country is facing. A diesel refund, limited to 80% of the Road Accident Fuel (RAF) levy, was to be extended to the manufacturers of foodstuffs for the use of diesel in generating electricity. The minister stated that the aim of the implementation of this relief was to limit the impact of power cuts on food prices. This refund would be in effect from 1 April 2023 to 31 March 2025.

This Diesel Refunds for Foodstuff Manufacturers Scheme (DRFMS) is different and separate from the Diesel Refund System which is reflected in rebate item 670.04 of Schedule 6 Part 3 of the Customs and Act No. 91 of 1964 (C&E Act) for the primary producers on land (mining, forestry, farming), offshore activities, harbour vessels, rail freight, and certain electricity generating plants.

The Diesel Refunds for Foodstuff Manufacturers Scheme (DRFMS) is governed by the C&E Act read with Schedule No. 6, Note 14 in Part 3 of the same Act. The pre-requisite for application for the Diesel Refunds for Foodstuff Manufacturers requires registration for VAT, although it is not administered on the VAT system.

The application to register as a refund user is done via the DA 185 form accompanied by the Annexure DA185.4A3 form and the supporting documents, which are to be submitted via the SARS Online Query System (SOQS). The opening date for registration applications is 29 September 2023 and refund claims will be backdated to 1 April 2023 as the date of registration.

Approval for registration is subject to meeting the legislated qualification criteria and requirements.

Only the manufacturers of foodstuffs classifiable under Chapters 2 to 21 of Schedule No. 1, Part 1 of the C&E Act (with exclusions) are eligible to register and apply for diesel refunds under this scheme.

The manufacturers of the following chapters under Schedule No. 1, Part 1 are excluded from the Diesel Refund for Foodstuff Manufacturers Scheme.

a) Any products and preparation for making of any beverages classifiable under Schedule No. 1, Part 7, Section A
b) Any items listed under Chapters 5, 6, 13 and 14
c) Any items listed from Chapters 22 to 99.

This Schedule, being a highly detailed 696-page document, may be found on the SARS website via link: https://www.sars.gov.za/legal-lprim-ce-sch1p1chpt1-to-99-schedule-no-1-part-1-chapters-1-to-99/

The process to claim a refund under this scheme is administered through the Excise DA66 Refund process.

Only once registration is approved, can refund claims be made by submission of a DA 66 form together with supporting documents to a SARS Excise branch closest to the manufacturing premises. The DA66 refund application will be subjected to the verification/audit processes before the refund can be approved for payment.

All relevant documentation relating to diesel purchases as well as the logbooks and/or other records which indicate the actual litres of diesel purchased and used during the tax period must be retained for a period of 5 years.

For more information, see the Diesel Refund for Food Manufacturers Webinar (https://www.youtube.com/watch?v=fycXtBKB7zc) or presentation on the SARS website via link https://www.sars.gov.za/wp-content/uploads/Docs/Webinarsuppdocs/Diesel-Refund-for-Foodstuff-Manufacturers-DRFMS-1-September-2023.pdf.

Further information regarding diesel refunds can be found via this link: https://www.sars.gov.za/customs-and-excise/excise/diesel-refund-system/

A summary of the Diesel Refund System is also available via link https://fincor.co.za/diesel-refund-system/ on the Fincor Professional Accountants website (along with dozens of other tax-related articles).